RAINBOW Tourism Group (RTG) new chief executive officer, Tendai Madziwanyika says the hospitality concern would return to profitability by the end of next year.
REPORT BY NDAMU SANDU
The return to profitability would be driven by an aggressive push in revenue and the lowering of costs.
Madziwanyika took over the reins at RTG last week after the hospitality group had been operating without a substantive CEO following the resignation of Chipo Mtasa in March.
“We have set a target to reach profitability by year-end 2013. We are developing a turnaround strategy that we will fully implement in order to realise this stated position,” said Madziwanyika. “We believe that if we aggressively drive revenues, push down costs and reconfigure our business processes, this business will in a space of two years reverse the losses it has accumulated since dollarisation.”
In the half year ended June 30 2012, RTG widened its losses to US$3,2 million from US$1 million in the same period last year, weighed down by finance costs.
Madziwanyika said the US$10 million secured by the group would be used to restructure the short-term debt.
The medium-term loan was secured from Capital Bank.
“This facility will have a significant impact on our profit and loss account in that we would have reduced the interest burden that is currently weighing down our performance. The reduction in interest burden will free up cash flows that can be applied to some of our urgent needs of the business,” Madziwanyika said.
RTG is also set to raise US$5 million from existing shareholders to further recapitalise the business.
Madziwanyika said RTG is a hospitality group with potential to re-position itself as the pre-eminent group.
“There is an inherent strength within the Rainbow Tourism Group brand that is yet to be realised, and a capacity for growth. RTG is a group with great potential in terms of its asset base, location of properties, human resource capital and a loyal customer base,” Madziwanyika said when asked what had lured him to join the stock exchange listed company.
In the six months to June, RTG reported a depressing performance of its operations in Zambia, adding that returns in Mozambique were good.
Madziwanyika said that in the outlook, the group was reviewing the business model in line with its turnaround strategy.
“This will determine our future areas of focus,” he said.
Madziwanyika is no stranger to the hospitality sector after a stint at rivals, African Sun, as managing director for nine years.
He is the former president of the Zimbabwe Council for Tourism.
Squabbles delayed recapitalisation
The recapitalisation plans for the group have been on the cards for years but shelved as shareholders fought for the control of the group.
So acrimonious were the relations between shareholders that the group had to hire a consultancy firm to force two major shareholders, the National Social Security Authority and Nicholas van Hoogstraten to talk.
This culminated in the appointment of new board of directors representing the interests of the shareholders.